E.U. DEAL OPENS TREATIES FOR RENEGOTIATION / THE FINANCIAL TIMES ( RECOMMENDED READING )

EU deal opens treaties for renegotiation

By Joshua Chaffin in Luxembourg, Ben Hall in Paris and Quentin Peel in Berlin

Published: October 18 2010 20:02
Last updated: October 18 2010 23:29


The European Union treaties would be re-opened as part of a sweeping deal struck by Germany and France to reform the eurozone’s budget rules in the wake of a Greek debt crisis that threatened the single currency.


Nicolas Sarkozy, the French president, consented to a renegotiation of the treaties to create a permanent EU mechanism to resolve future sovereign debt crises.

Berlin has been pushing for a permanent mechanism to replace the existing €440bn European Financial Stability Facility – set up to bail out debt-laden member states after the Greek debt crisis in May – which will expire in 2013.


However, reopening the treaties would require the approval of all 27 EU member states – which is hardly assured. The UK is known to oppose such a move.


To win France’s support, Angela Merkel, the German chancellor, agreed to soften the rigid budget reforms proposed last month by the European Commission, which called for “near-automatic” sanctions against wayward member states.


France – along with Italy and Belgium – has argued that the member states should have greater political discretion to intervene in the process. Germany, which had been at the forefront of calls for tough sanctions, gave ground and agreed to an additional layer of political review.


The Franco-German bargain emerged as ministers gathered in Luxembourg for the final meeting of a taskforce chaired by Herman Van Rompuy, the European Council president, to draw up rules to improve economic governance and safeguard the euro.


Member states have struggled for months to craft a regime that is both rigid enough to ensure compliance while also retaining some flexibility to account for the unique circumstances of individual member states.


A commission official acknowledged that the sanctions now under consideration were no longer automatic, but argued that they still represented an improvement over the current system that is prone to political meddling.


Jan Kees de Jager, the Dutch finance minister, who warned on the eve of the meeting that countries were “getting cold feet,” also gave them his endorsement: “It was an uphill battle and at times it seemed Europe would come out empty handed. Fortunately, in a concerted effort we managed to achieve significant progress with regard to sanctions that will make Europe stronger and healthier in the long run.”


The Franco-German agreement requires Mr Van Rompuy to submit proposals for “a robust crisis resolution framework” by March 2011, with a final treaty change to be agreed by 2013.


Copyright The Financial Times Limited 2010.